The Mzansi bank account : determining its success and the way forward

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Abstract

The Mzansi bank account, launched in the latter part of October 2004, arose out
of the financial services charter and is aimed at low income, previously unbanked
individuals and households. Since its inception, it has been supported by the
following financial institutions: Amalgamated banks of South Africa (ABSA),
Standard Bank of South Africa (SBSA), First National Bank (FNB), Nedbank
(essentially the four major retail banks in South Africa) and the Postbank (a
subsidiary of the Post Office).This study investigates the performance of the
Mzansi account from both the customer and supporting financial institutions'
perspective
The investigation's primary objectives focused on determining how accessibility
to financial services (and to the account itself) may be improved for customers,
determining what Mzansi customers needs are, and how the account may be
expanded or enhanced to meet these needs. The secondary objectives
concentrated on problems the supporting financial institutions faced: improving
accessibility for customers (without too costly an investment in supporting
infrastructure), differentiating the product and service significantly from other
competing institutions, limiting product cannibalisation (where the Mzansi
account is chosen over higher order retail bank products) and limiting overall
costs of the account to ensure profitability.
The research methodology consisted of a literature study and empirical research
that in turn encompassed administering survey questionnaires to current Mzansi
customers. The literature study focused on both national and international
attempts at banking the unbanked, distilled common learnings from these
attempts and ultimately described best practices with particular reference to
improving accessibility to financial services and tailoring financial services
options to meet the most critical needs of the unbanked market. The literature
study also found that a definite business case exists for financial institutions
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willing to pursue this market, provided that the core value proposition was
adequately adapted. Previous findings on how to avoid product cannibalisation,
as well as how to differentiate products and services to entrench greater
customer appeal completed the literature study.
The empirical research encompassed the development of a survey questionnaire
aimed at understanding five core research areas: the Mzansi customer profile
(for a sample of one hundred and forty seven existing customers and transacting
at Gauteng branches and outlets and evenly distributed across each of the
supporting financial institutions), gauging how well customers understood their
accounts, determining the service customers had received, understanding
customer transaction and the value they attach to these transactions, and finally
affording customers the opportunity to suggest ways in which the account may
be improved. The questionnaire comprised both open and closed ended question
(the latter questions used a five point Likert-type scale to determine scoring).
The results, apart from compiling an overall demographic profile of the customer,
showed that significant work still needs to be accomplished by the financial
institutions to ensure customers understand their accounts and the various
transactions and channels available to customers. AIM transaction for instance
caused customers problems; to the extent that customers were willing to pay
almost twice as much for branch transactions instead. The service received by
customers also proved to be average, with more customer orientated
demonstrations and a greater amount of time spent during the account opening
procedure being seen as valuable ways to improve the overall service received.
Customers valued cash withdrawal transactions the most, favouring the use of
the branch channel. Customer needs were identified to be primarily credit based;
with different credit facilities being required. Customer motivated improvements
also extended to a greater range of free transactions on the account, improved
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interest rates on credit balances and some form of loyalty based discount on
certain transactions.
Practical ways suggested to improve access to the account included account
proliferation techniques (where third parties may initiate the opening of an Mzansi
account on behalf of a customer) and the use of mobile banking facilities. The
product functionality was also recommended to be expanded to include limited
numbers of debit and stop orders for the retail banks' offering, while a strong
emphasis was placed on approaches to improving customer financial literacy by
way of education programs that are community based. The later aspects were
also seen as strong departure points that the supporting financial institutions
could leverage to significantly differentiate their service and product offering.
The objectives of the study were deemed to have been met, despite the fact that
the study's geographical bias, customers possibly misrepresenting their income
and possible translation bias.